When a Co-op Board Misbehaves

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CreditCreditGuy Billout

By Jim Rendon

Jan. 26, 2018

Ever since Liang Liang, who goes by Lily, and her husband moved into their two-bedroom apartment at the Gardens at Forest Hills, a 368-unit cooperative, in 2014, they have had problems with the co-op’s board of directors.

When Ms. Liang filed a complaint about a neighbor who handed out keys to multiple relatives, no action was taken. Instead, her signed complaint was shared with the owner.

When she questioned a plan to replace the complex’s windows, she said the board president spread misinformation to discredit her. When she and others ran for the board, they never received contact information for the 100 or so shareholders who rent out their units and don’t live in the building, making effective campaigning impossible.

Ms. Liang and about a dozen other shareholders believe that the co-op president, Belal Mohd, has improperly benefited from his role on the board and they have filed a lawsuit against him and the cooperative in State Supreme Court in Queens. They want the court to nullify the previous election, force Mr. Mohd to step down and require the current board to divulge the full shareholder contact list, along with meeting minutes and financials, so they can have what they consider a fair election.

After reviewing public records of sales at the co-op, the shareholders discovered that over the last decade, more than 60 sales were listed and sold by Mr. Mohd, who is a broker and the owner of Superior Services Realty. By Mr. Mohd’s own count, in a letter he sent to shareholders, just 28 units over the same period were sold by other agents. Though many of Mr. Mohd’s own listings for units in the co-op advertise a “no hassle board,” several owners have claimed that the board has been quicker to reject buyers who were trying to purchase a unit listed by someone other than Mr. Mohd.

Ms. Liang, a 43-year-old editor and translator, has spent countless hours poring over property sales information, appealing to elected officials for help and organizing fellow shareholders.

“This shouldn’t be my job,” she said. “But this is my neighborhood. I see these folks on a daily basis, and they have been under this for 10 years. No one has been able to help them.”

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Liang Liang, who goes by Lily, has helped organize shareholders at the Gardens at Forest Hills to file a lawsuit against the current co-op board.CreditGeorge Etheredge for The New York Times

Mr. Mohd declined to be interviewed for this story, citing the lawsuit. He wrote in an email, though, that the majority of the co-op’s shareholders do not have concerns with the building’s management or his conduct. Those suing him, he wrote, “have their own agenda and malicious intent to harm me personally and professionally. I am a real estate broker and you can look me up in Zillow, Trulia, etc. My reputation is all that I have and their false allegations are very hurtful to me and my family.”

Co-op board battles are often contentious and can be particularly fraught since they are tied to people’s homes, likely their most substantial financial investments. Ms. Liang and other shareholders have learned through their efforts that because there is no agency responsible for regulating co-op and condo board behavior, there is little recourse for shareholders if they believe a board is misbehaving, other than to take on the significant expense and time required to file a lawsuit.

Earlier this month, New York State amended its business and corporation law to require boards to disclose voting information and the details of any contracts where a board member has a conflict of interest. But no agency is named to enforce the law and there are no penalties for violating it.

Lawyers who specialize in co-ops say that the kinds of allegations in the Gardens at Forest Hills lawsuit are extremely troubling. Co-op and condo board members are required to act only in the building’s best interests, not for their own benefit, said Steven Wagner, a partner at the law firm Wagner Berkow. A board member cannot represent the co-op’s best interests when he or she stands to make money from the board’s decisions, Mr. Wagner said.

Neil B. Garfinkel, a partner at Abrams Garfinkel Margolis Bergson and the broker counsel for the Real Estate Board of New York, the trade association for the real estate industry, has written in the organization’s newsletter that real estate agents should not serve on boards when they sell properties in the co-op. Though there is no law that prohibits the practice, conflicts of interest are unavoidable, he said.

Some boards prohibit brokers from serving and others require that they recuse themselves from decisions related to their listings, said Aaron Shmulewitz, a partner at Belkin Burden Wenig & Goldman. “A bad person can take advantage of the system,” Mr. Shmulewitz said.

Despite the potential for conflicts of interest, there is little shareholders can do if they believe a line has been crossed. Ms. Liang contacted the state attorney general’s office over a year ago asking it to investigate Mr. Mohd, but it has jurisdiction only over condo and co-op offering plans.

Criminal prosecution of board members is also rare. In one such instance, the president of the board at Co-Op City in the Bronx pleaded guilty in 2007 to taking kickbacks for awarding a painting contract.

Another possible avenue for relief is the New York City Commission on Human Rights, but it acts solely on cases of discrimination.

Elections are really the only way to change a board, said Mary Ann Rothman, the executive director of the Council of New York Cooperatives and Condominiums. “Democracy is hard work,” she said. “You have to attend meetings, vote in elections and consider serving on the board.”

But even fully engaged shareholders can sometimes find their votes undermined.

Steven Gursky and his wife were well aware of the conflicts that can arise when they moved into the co-op at 35 Sutton Place on the Upper East Side of Manhattan eight years ago. “We made a commitment to each other to stay out of the co-op fray,” he said. That vow didn’t last long.

Mr. Gursky said that some residents did not get along with the board president, Stanley Bell, and were trying to replace board members aligned with him. In the 2015 election, an opposition group had an opportunity to flip the balance of power. But when the vote totals were released, one insurgent candidate lost by 1,403 votes, according to a lawsuit filed against the co-op. (Just as with any corporation, each shareholder receives one vote for each share owned, with owners of larger apartments receiving more shares.)

The lawsuit also claimed that the building superintendent tried to pressure a shareholder to vote for the incumbent by suggesting that the election of new board members could delay her apartment renovation. And Mr. Gursky, a partner at the law firm Olshan Frome Wolosky, had a hunch that the 4,560 votes of that shareholder, who supported the insurgent candidate, had not been counted.

A group of shareholders decided to sue when the managing agent confirmed that the votes in question were never counted. Since shareholders have to fund any legal action on their own, Mr. Gursky’s firm took on the case at a reduced rate.

A State Supreme Court judge in Manhattan ruled that all the votes had to be counted, giving the insurgent candidate the victory. Mr. Bell, who eventually left the board, did not respond to requests for comment. The superintendent was let go, and Mr. Gursky believes that the building, which has a new roof deck and a renovated lobby, is now much better managed.

Co-ops have a reputation for heated debates, in part because their boards have more far-reaching control over things like approving sales than condo boards do. But board problems often crop up in condos too, Mr. Wagner said.

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Lynn Calvacca owns two units at this Sunnyside condo. She and her husband have sued the condo board for implementing fines without getting proper approval from condo owners.CreditGeorge Etheredge for The New York Times

At the six-story brick condominium building at 47-55 39th Place, in Sunnyside, Queens, a lawsuit against the condo board alleges that the building manager, Neal Milano, had decorated the lobby with “right wing political propaganda, murals, pictures, and other offensive materials,” and refused to take the materials down when residents objected. Local media outlets reported that the images included photos of Hitler and Stalin. The posters remained up for several months last year, until a local activist tore them down in August. But shareholders say they were just an outward manifestation of the building’s deeper problems.

Lynn Calvacca, a Queens attorney who owns two units in the building, said that Mr. Milano, who is also a board member, has made life miserable for many residents. She and her husband, Jerry Iannece, a newly appointed criminal court judge, filed the lawsuit against the condo. According to court filings, the condo board implemented high fees and fines without properly incorporating them into the building’s bylaws. Ms. Calvacca said those changes should have been approved by two-thirds of all the owners, not just a vote by the board members.

In her suit, Ms. Calvacca states that Mr. Milano uses the fines, which mount up quickly, to retaliate against owners. According to the suit, the board has implemented and increased several fees and fines since 2011, when Mr. Milano was elected to the board, fired the managing agent and started managing the building himself.

The fines include: $500 for not having a rug or carpet on the floor; $100 a month for each overnight guest; $200 a month for renting a unit out; and a $5,000 fine for failing to pay a fee. In her suit, Ms. Calvacca said that she was fined $500 because her tenant disposed of a Christmas tree on the sidewalk following Department of Sanitation guidelines. According to the lawsuit, the notice called her tenant “deranged, vile, animalistic and despicable.”

Ms. Calvacca has appealed to the city’s Commission on Human Rights, the Anti-Defamation League and the state attorney general’s office. Calls to a number for the board were not returned. Last September, Mr. Milano was arrested on charges of stalking and harassing a tenant. Attempts to get comment from Mr. Milano through his criminal lawyer were not successful.

Jacob Laufer, the attorney for the board and its members, including Mr. Milano, said in a written statement that the fees were applied uniformly and never used to retaliate against anyone. He said the posters were historical and included Winston Churchill and other leaders. The current board members will not run in the upcoming election to avoid wasting building resources fighting over posters and “fending off demonstrably false and disturbing claims,” he said.

Complaints accusing Mr. Milano of discrimination prompted the city’s Commission on Human Rights to open an investigation. Seth Hoy, an agency spokesman, would not comment on the investigation, but confirmed that the commission could potentially dissolve the board and ban existing board members from continuing to serve, to stop housing discrimination.

Ms. Calvacca said she hopes the condo gets a responsible board and a managing agent that can take care of the building’s finances. “It’s a nicely located building near the 7 train,” she said. “But it is just a mess.”